tv Nightly Business Report PBS July 17, 2012 6:30pm-7:00pm PDT
>> this is n.b.r. >> susie: good evening. i'm susie gharib. tom is off tonight. ben bernanke tells lawmakers the fed is ready to take action to jumpstart the economy, but he won't say when. millions of investors could be hit with higher taxes on dividends. we look at what's at stake. and how immigrants are helping save jobs in one missouri town. as we continue our series, "immigration and the economy." that and more tonight on "n.b.r." ben bernanke told congress today the u.s. economy is weak and the federal reserve is ready to take action to change that. but speaking to the senate banking committee, the fed chairman didn't give any clues on when policymakers would do something. darren gersh reports. >> reporter: here's ben
bernanke's take on the economy: progress on unemployment-- frustratingly slow. consumer spending, business investment and manufacturing-- all slowing. but the slowdown isn't deep enough yet to convince the fed to apply more monetary medicine. >> we haven't really come to a specific choice at this point, but we are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market. >> reporter: but the fed is clearly ready to do more. inflation is low, up just 1.7% over the last 12 months. that's drifting to the bottom of the fed's comfort zone. >> there is a modest risk, not a large risk, but a modest risk of going in the other direction which is towards deflationary side. >> reporter: asked about the bank interest-rate fixing scandal, bernanke said the fed told british bankers back in 2008 to fix libor. that's the interest rate banks charge each other to lend money. they didn't, and bernanke is not ready to endorse libor as a safe benchmark for consumer loans.
>> i can't give that assurance with full confidence because the british bankers' association did not adopt most of the suggestions that were made by the federal reserve bank of new york. >> reporter: bernanke added concerns about libor manipulation are lower now than during the financial crisis, but he expects libor will be replaced by other market interest rates if it is not overhauled soon. darren gersh, "n.b.r.," washington. >> reporter: i'm diane eastabrook. still ahead, farmers and legislators call for more accountability from the futures industry. "nightly business report" is brought to you by: captioning sponsored by wpbt
>> susie: despite that gloomy outlook from fed chairman bernanke, the nation's homebuilders are feeling upbeat. the national association of homebuilders' confidence index posted its biggest monthly jump in nearly a decade. and that helped boost investor confidence on wall street. the dow rose almost 80 points, the nasdaq added 13, and s&p gained ten points. it's a mistake for investors to be hoping for the fed to take more action on the economy. so says our next guest, josh feinman. he's chief economist at d.b. advisors. so, josh, i guess this is a case of be careful what you wish for, right? >> exactly. i think people have been wishing for it for a long time, and my concern is that you're only going to get it if the economy is weak and weakening. i don't think anybody should root for that. what would be best for everyone, investors, employees, businesses, is if the economy were strong enough that you wouldn't have to think about doing these sorts of things,
but unfortunately it's not. >> susie: investors really zeroed in on what fed chairman bernanke said today about the economy and he was talking about that the economy would post a small gain when the second quarter numbers will come out. also a lot of people were talking today about some recession comments that came from bill gross where he's saying that measured by how the labor market is doing and how investment is doing and how housing is doing that the u.s. economy is approaching recession. so it begs the question, how is the economy doing, how good shape or bad shape is it? >> it's struggling, there's no question, and it's lost some momentum recently. i think it's still labor be under efforts to restore balance sheets and state and local government refrenchment strength, these sorts of things, and it also has europe's troubles, some of which are washing across the atlantic, and the looming fiscal cliff which is a new risk for early 2013.
but i don't think it's quite as bad as thinking that it would go back into recession. it does have some, there are some bright spots, statehousing oh -- housing showing some signs of stablizing. and some of those drugs are diminishing, there's been some repairs on the balance sheets and the like. so it's not all gloomy. i don't think the economy is in danger of lapsing back in. >> susie: the big question bernanke got a lot today on capitol hill is what can the fed do. everybody thinks the fed should do something. bernanke says that they are looking to find new ways to boost the economy. can the fed really save the economy? >> save, no. they still have some arrows in their quiver, but they don't have a lot. what could they do? they could use communication, they could extend the period over which they expect to keep short-term rates low. to help hold down long rates. they could do another asset purchase program, that could squeeze down long-term rates a bit. but there's not a ton of
things that they can do, and there's certainly no pan asee a, no magic wand they can wave to make the economy great. if there were such a thing they would have used it already. >> susie: there still is the question that if the fed does have to intervene, when might they do it. do you see something happening this year, maybe at the july meeting or at their august fed conference in jackson hole? >> i think it obviously depends on the evolution of the economy and so on. i don't think they're right on the cusp of doing something again, they just extended the maturity extension program at the last fomc meeting. but if the economy doesn't start to show some signs of gaining a little momentum and some of these down side risks are still out there, i think there's a possibility they could do something before the end of the year. >> all right, i'll leave it there. josh, thank you so much, josh feinman at db advisor.
>> susie: josh feinman. >> susie: come january, investors could be in for a rude awakening, a sharply higher tax bill. that's when a bush-era tax break on dividends expires. ruben ramirez reports on what's at stake. >> reporter: the battle over whether to extend the bush-era tax cuts beyond 2012 could hit the pockets of tens of millions of investors. unless congress and the president agree to changes. if not, the dividend tax rate, which stands at 15%, will rise to nearly 40%. add in a new "healthcare law" related tax on dividends, and
investors could see their dividend tax bill nearly triple. standard and poor's says that will impact 93% of s&p 500 companies. >> some sectors, however, are impacted even more, such as telecommunications and especially utilities, which are known as dividend payers. this changes who is going to hold it and what their risk/rewards are. >> reporter: a study of recent tax returns shows nearly 13 million americans have some sort of utility company holdings, mostly in mutual funds. the vast majority of those people were over 50 years old with incomes below $100,000. >> older americans don't shy away from direct holdings of corporate equities or taxable mutual funds. instead, what they do is really direct. due to their risk tolerance, their portfolios are really more focused on income-producing stocks. >> reporter: s&p's silveblatt says dividend paying companies may move up payouts to beat the
tax cut expiration. >> to give you an idea of the magnitude, january of this year, $21 billion in qualified dividends were paid out. so changing when that's done to december 31 is going to be a high priority. >> reporter: in the long-run, if the tax cut expires, silverblatt says corporations could pull back on dividend increases and increase share buybacks. ruben ramirez, "n.b.r.," new york. >> susie: the c.e.o.s of several big utility companies were on capitol hill today talking with lawmakers about the impact of higher taxes on dividends. after the meeting, i talked with one of them: thomas fanning of southern company. i asked him what was his message to congress. >> really a strategic message and that is in order to preserve the financial integrity of the united states we need to move towards comprehensive tax reform. but in the meantime, there are two very important tactics that we need to consider that relate to the tax treatment on dividends and capital gains.
the first point, we need to keep those linked. we need to keep parity. the tax rate the same, between dividends and capital gains. and the second is, in order to encourage capital formation, job creation, and permanent income growth for american citizens, we need to keep those rates as low as possible. >> susie: mr. fanning, do you think you made a convincing case, do you think lawmakers will listen to what you're saying and keep the tax rate on dividends where they are now? >> i think we made a very convincing argument n. fact, i would say generally speaking we had a very sympathetic audience. obviously it's too early to tell what lawmakers will do between now and then, and in fact what they'll do in the lame duck congress. but it is clear that if we don't do something, the negative implications of the inspection -- financial cliff we all talk about would be terrible for the market and terrible for american citizens. >> susie: let's just saw that congress is forced to raise
taxes on dividends come january 1. what will you do at southern? >> the dividend decision ultimately that is made by the board of directors is one of the longest term decisions that we make. it is my sincere hope that congress, and i believe they will, i believe through constructive engagement congress will do the right thing that we'll reach a comprehensive solution that includes keeping linked dividends and capital gains, the tax rates there and keeping them as low as possible, in order to promote a growing economy. i think we'll do that. >> susie: you are in washington, you know fed chairman bernanke gave a somewhat pessimistic report about the economy today. from your perspective as a businessman, how do things look in your business these days? >> traditionally the southeast economy has been a little more vibrant and resill yent tonight rest of the united states economy, we continue to see that. we continue to see growth in the industrial sector. we haven't seen jobs created, really since about 2007. but recently we're starting to
see the jobs come back. so is that a bullish signal. >> susie: if the fed reduces interest rates so they come down much lower, will you hire more? will you expand more in your business over the next year? >> well, the southern company is the only company in the united states building what we call a 21st century generation portfolio. that is we are leading the nation building new nuclear 21st century gas, cole, renewables, we've already committed 20 billion in capital to making that vision come to through skpigs in the process we're creating over a quarter million jobs. my sense is we will stay that path in the future. >> susie: all right, mr. fanning, thank so you much for your time. appreciate your coming on n. b. r.. >> thanks very much.
>> susie: "we all must do better." that's what the regulator for the u.s. futures industry told members of congress today. the chairman of the commodity futures trading commission said his agency failed customers after the c.e.o. of p.f.g. best admitted last week he stole at least $100 million from customer accounts over the past two decades. as diane eastabrook reports, this latest scandal is rattling farmers who count on commodity futures to run their businesses. >> reporter: bob johnson's farm about 50 miles west of chicago includes 25,000 hogs and 2,000 acres of corn and soybeans. johnson sells livestock and grain on the futures market, saying it's invaluable to his business. but last fall, more than $500,000 of money he had in a trading account at m.f. global went missing when the brokerage went bankrupt.
he's still waiting to get some of that money back. >> based on the last check we got two or three weeks ago, we're still hoping to recover about $110,000. >> reporter: that experience shook johnson's confidence in the futures industry. it's been shaken further by p.f.g. best founder russell wasendorf's arrest last week for misappropriating customer money for two decades. at a senate agriculture hearing in washington today, the chairman of the commodities futures trading commission admitted the system failed. >> just like the police cannot prevent all bank robberies, market regulators cannot prevent all financial fraud. having said that, the system failed to protect peregrine customers, and we all must do better. >> reporter: last friday, the c.f.t.c. approved new customer protection rules. they require senior managers at futures brokerages to approve excessive withdrawals from customer accounts, detailed daily reports on customer segregated accounts, and
detailed information on where those funds are deposited. john lothian is a former futures broker who writes a daily newsletter on the industry. despite the new rules, he fears some investors may stop trading futures altogether. >> what we risk is losing a large number of the speculators that provide liquidity to these markets. that is key to the ecosystem that the futures world lives in. >> reporter: johnson shares that concern. >> i hope that doesn't happen because it's been a very useful tool. >> reporter: johnson hopes the latest scandal will result in more accountability to the futures industry so everyone from farmers like him to speculators will feel confident trading commodities. diane eastabrook, "n.b.r.," dekalb county, illinois. >> susie: yahoo's new c.e.o. marissa mayer got a lukewarm reaction from investors on her first day on the job. the stock fell slightly to $15.60 a share, and shares barely moved after the company
reported better than expected quarterly numbers after the bell. investors and analysts were disappointed that mayer didn't join the post earnings conference call, especially after all of today's headlines about the big management announcement. >> obviously, marissa is a high caliber, well-respected leader in the industry, and her resume speaks for itself. we are very excited. we are going to take a little time to work through that. we need to be great at content and certain types of technologies. our new c.e.o. brings a strong tech background, but we also have a lot of media experience here, and its a powerful combination when we get them right. >> susie: excluding charges, yahoo earned 27 cents a share thanks to strength in its asian units, four cents more than analyst estimates. revenues fell to $1.2 billion. another tech giant reporting after the bell: intel. let's take a closer look in tonight's "market focus." the chip maker reported better than expected numbers, but investors focused on what the company said about the future.
intel is expecting slower growth in the current quarter and it cut its full year revenue forecast, blaming it on the slowdown in china and the economic slump in europe. as for second quarter results, profit fell 4% to just under $3 billion, or 54 cents a share. still, that was two cents better an analyst estimates. revenues came in at $13.5 billion. the stock rose ahead of those results, closing the regular session at $25 a share, and fell fractionally in after hours. so far this year, the stock is up more than 4.5%. intel wasn't the only blue chip stock reporting today. coca-cola posted solid results despite higher raw materials costs. second quarter earnings came in above estimates at $1.22 a share on slightly higher revenues. rising volumes in north america and india helped offset weakness in europe. coke stock bubbled higher, rising almost 2% to $77.69 a share. quarterly numbers at johnson and
johnson fell 50% to $1.4 billion, or $1.30 a share, and the company also cut its full- year earnings forecast. still, j&j shares gained 55 cents to $69 today. in the financials, goldman sachs posting second quarter results well above analyst estimates. the financial giant earned $1.78 a share despite a big drop in revenues from its investing and lending units. investors didn't seem to mind; the stock rose 30 cents to almost $98 a share. we have more analysis on goldman shares on our web site, www.nbr.com. you can find it under the "blogs" tab with michael kahn. disney was the dow's best performing stock today. it rose $1.49 to $49.35 a share. that's a new all-time high for disney stock. and investors had fun with mattel today, sending the stock up almost 10% to $34 a share.
the toymaker's earnings surged 20% to 28 cents a share, seven cents above estimates. mattel says that's thanks to strong barbie sales and toys tied to the new batman movie. and in today's "e.t.f. market flash," the standout here: the emerging markets e.t.f., up almost 1.5%. and that's tonight's "market focus." >> susie: as we continue our look at immigration and the u.s. economy, we take on a key issue for manufacturers: keeping jobs here in the u.s.
a new pbs documentary called "homeland: immigration in america" shows the issues facing one small missouri town as it tries to keep jobs here. >> at the height of the recession in 2010, the unemployment rate in monett was 2% better tonight national average. housing prices remained stable, but this is not a wealthy town. poverty rate is high. getting by often requires two or more jobs per family. but there are opportunities for upward mobility because monett is not a one factory chicken town. he quit tyson and came to work at efco industries, a factory making pella windows and doors. >> we're the largest employer in monett. so obviously we're pretty important to monett because we offer over 1200 jobs to people
in the local area. >> the united states is losing moving jobs. 6 million gone in the last 20 years. but immigrants are keeping monett from being one of the losers. they are taking jobs. they are also saving them. >> there's meat packing companies in the area, and poultry processing plants that drew a hispanic population to town. the reality of it is as fast as efco is growing during the 90s and during the early part of the 2000s, if we don't have a hispanic population to draw from here, we quite likely would have had to expand elsewhere. >> the revival of monett, missouri was built upon the inflex of imgrant hispanic labor, the economic benefits are clear. the social changes are more
complicated. >> the most visible part of the hispanics being here was that the municipal court records were just filled with hispanic names because of drinking and driving. and not having a drivers license. they really had to work on that idea that you're here, you got to function like we do. >> i'm 71 years old. and it's changed an awful lot. >> reporter: you don't see -- >> you don't see the overwhelming percentage of hispanics in the courthouse news today that you did see 10 and 15 years ago. the people who are here now have been here a while. and they get it. and these are folks now are buying homes, they're settling in roots. they're becoming part of the community and everybody likes that commitment.
>> susie: tomorrow, we will have more on the economy and immigration from this documentary titled "homeland: immigration in america." it's produced by the nine network in st. louis, and the full series begins airing on pbs stations this friday. also coming up on "n.b.r." tomorrow: is the housing recovery stuck in the basement? we'll get the latest on new home construction. then, another wave of earnings reports, including bank of america and i.b.m. the business of baseball-- it's big money, accounting for billions of dollars a year in revenues. money man tom ricketts owns the chicago cubs. tonight, as we go "beyond the scoreboard," he tells rick horrow he's always wanted to own a team. >> no, but it was always kind of a dream. you know, i always thought it would be the dream job, and actually on my business school
application works have been 1990ish, i wrote that my dream job is to own the cubs. >> post bill james, post money ball, an alit ix ix clearly significant to everybody in major league baseball. but you had a head start being in the financial perspective. how important was that background and that perspective? >> you can bring it back to the bond market. obviously that's a very mathematical, very just very quantitative market. yet your success in that market is determined by your ability to relate to people, understand their needs and make sure that what you're doing for them is what, you're giving the service they need. so there's a lot of parallels there. but i think it really comes back to the fact that you can do all the analysis you want, but you have to keep it in perspective, it's just one piece a big puzzle. and that you're really projecting performance or you're trying to help propel,
trying to help people perform. >> how do you feel about the health of major league baseball as a business in general? >> i think it's in a great place. obviously the attendance has been steady, a little over last year. i think most teams are doing real well. we had a couple issues for some organizations, but generally speaking everyone is doing pretty well. i think a lot of this stuff the league has been doing has worked out tremendously well. so i think we're heading in the right direction. >> thank you. >> thank you. >> susie: and that's "n.b.r." for tuesday, july 17. have a great evening everyone. we'll see you online at www.nbr.com and right back here tomorrow night. "nightly business report" is brought to you by: